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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ascential Plc | LSE:ASCL | London | Ordinary Share | GB00BYM8GJ06 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.40 | -0.77% | 311.00 | 311.00 | 311.80 | 315.00 | 309.20 | 314.00 | 1,859,385 | 16:35:19 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Public Relations Services | 586.3M | -191.3M | -0.4345 | -7.16 | 1.37B |
From Apr 2019 to Apr 2024
TIDMASCL
RNS Number : 8180L
Ascential PLC
24 July 2017
24 July 2017
Ascential plc
Interim results for the six months ended 30 June 2017
Successful first half, growing revenue, profit and reducing debt in line with plan
Continued investment in new products and platforms to drive future organic growth
London: Ascential plc (LSE: ASCL.L), the global, business-to-business information company, today announces its 2017 interim results for the six-month period ended 30 June 2017.
Operational highlights
-- Successful execution of our organic growth strategy founded on leading customer retention capabilities, new product launches (Groundsure Avista, Coloro, WGSN Barometer, WGSN Insight) and growth from event extensions (Money20/20 Europe, Bett Middle East). Continuing investment provides foundations for future growth.
-- Good progress on evolution towards higher growth brands with the sale of 12 of the 13 Heritage Brands and the acquisition of MediaLink.
Financial highlights
-- Results in line with Company expectations. -- Another period of good Organic revenue growth -- Revenue from continuing operations of GBP222.0m (2016: GBP176.2m) -- Reported growth of 26% (or 7.2% on a constant currency Organic basis). -- Good Organic Adjusted EBITDA growth -- Adjusted EBITDA from continuing operations of GBP81.4m (2016: GBP63.2m) -- Reported growth of 29% (or 6.7% on a constant currency Organic basis) and
-- Expansion of margin to 36.7% (2016: 35.9%) with foreign exchange benefit in Exhibitions & Festivals more than offsetting planned product investment in Information Services.
-- Reported operating profit from continuing operations growth of 28% to GBP48.1m (2016: GBP37.6m)
-- Exhibitions & Festivals: Strong Organic growth of 8.2% in revenue to GBP137.0m and of 8.9% in Adjusted EBITDA to GBP64.5m.
-- Information Services: Organic growth of 5.2% in revenue to GBP85.0m and 1.1% in Adjusted EBITDA to GBP24.5m reflecting planned investments in new products. Good progress on the integration of One Click Retail and MediaLink.
-- Adjusted proforma diluted earnings per share -- Continuing operations of 13.3p up 55% (2016: 8.6p) -- Total operations of 13.4p up 44% (2016: 9.3p). -- Reported basic and diluted earnings per share -- Total operations of 7.1p (2016: 2.5p)
-- Strong cash generation with free cash flow after tax and capex of GBP74.5m (2016: GBP58.7m) resulting in closing net debt leverage of 1.7x (December 2016: 2.1x) after continued business and M&A investment. Operating cash flow conversion of 103% (2016: 98%) and free cash flow conversion of 91% (2016: 87%).
-- Interim dividend of 1.8p per share (2016: 1.5p) up 20%.
Duncan Painter, Chief Executive Officer, commented:
"We have delivered successful first half results in line with our expectations. We grew both revenues and profits driven by the focus on our primary brands and on customer retention. The launch of new products such as WGSN Insight and the growth of our live, content-rich event extensions, Money20/20 Europe and Bett Middle East, contributed well to our growth.
The business continues to generate significant cash flows to fund investment, dividends and acquisitions and the integration of MediaLink and One Click Retail are progressing according to plan, enhancing our offering and opening up new opportunities for growth. Furthermore the strategic actions we have taken in the last 12 months enable us to optimise the focus on our primary brands and further accelerate our product and international revenue diversification.
With our Information Services division already contributing well to our organic growth, the benefit of enhanced growth contributions coming from recently acquired brands and the investments we continue to make to enhance our products and capabilities we remain confident that we will continue to deliver leading growth rates.
We enter the second half of 2017 with positive momentum. With our current level of forward bookings and the increasing geographic diversification of our revenue streams, we are confident that we will achieve our full year expectations."
Contacts
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Ascential plc
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Chief Executive +44 (0)20 7516
Duncan Painter Officer 5000
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Ascential will host a presentation for analysts and investors at 9.30am on 24 July 2017 at the offices of Numis Securities at The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT.
The presentation will also be webcast live at 9.30am from www.ascential.com, allowing the slides to be viewed. A recording of the webcast will also be available on-demand from our website in due course.
References to non-GAAP alternative performance measures are explained further below.
Financial Highlights
Six months ended
30 June Growth
2017 2016 Reported Organic(1)
GBPm GBPm % %
Revenue from continuing
operations
Exhibitions & Festivals 137.0 119.1 15% 8.2%
Information Services 85.0 57.1 49% 5.2%
-------- -------- -------- ----------
222.0 176.2 26% 7.2%
-------- -------- -------- ----------
Adjusted EBITDA from
continuing operations(2)
Exhibitions & Festivals 64.5 53.5 21% 8.9%
Margin 47.1% 44.9%
Information Services 24.5 16.6 48% 1.1%
Margin 28.8% 29.1%
Central costs (7.6) (6.9)
-------- -------- -------- ----------
81.4 63.2 29% 6.7%
-------- -------- -------- ----------
Total Margin 36.7% 35.9%
Operating profit from
continuing operations 48.1 37.6 28%
Profit before tax from
continuing operations 42.7 8.2 NM
Adjusted diluted proforma
earnings per share
(pence)
-Continuing operations 13.3 8.6 55%
-Total 13.4 9.3 44%
Reported earnings per
share (pence)
- Basic 7.1 2.5 NM
- Diluted 7.1 2.5 NM
Free cash flow(3) 74.5 58.7 27%
Free cash flow conversion 91% 87%
June December
2017 2016
Net debt (211.4) (223.7)
Leverage(4) 1.7x 2.1x
(1) "Organic" growth is calculated to provide a more meaningful analysis of underlying performance. The following adjustments are made: (a) constant currency (restating H116 at H117 exchange rates), (b) event timing differences between periods (if any) (c) excluding the part-year impact of acquisitions (of One Click Retail and MediaLink) and disposals (Naidex). There were no event timing differences in H117 or H116. Refer to the section on Alternative Performance Measures for further explanation.
(2) Adjusted EBITDA is IFRS operating profit before expensing (a) depreciation of tangible fixed assets and amortisation of software, (b) exceptional items, (c) amortisation of acquired intangible assets (d) impairment of tangible fixed assets and software acquired intangibles (if any) and (e) share-based payments.
(3) Free cash flow is cash generated from operations before exceptional items, less capital expenditure and tax paid. Free cash flow conversion is the measure of free cash flow divided by Adjusted EBITDA from both Continuing and Discontinued Operations.
(4) Leverage is Net debt divided by last 12 months' Adjusted EBITDA from both Continuing and Discontinued Operations.
Operating Review
We are pleased to report a successful first half performance, growing revenue and profit and reducing debt in line with our strategy.
Continuing record of growth, high margins and good cash generation
We delivered a strong operating performance in the first half with 7.2% Organic growth in revenue to GBP222.0m and 6.7% Organic growth in Adjusted EBITDA to GBP81.4m. Our EBITDA margin has expanded to 36.7% from 35.9% in the first half of 2016, with foreign exchange benefits in Exhibitions & Festivals more than offsetting the planned new product investment in Information Services. We also continued to generate strong cash flow with free cash flow after tax and capex of GBP74.5m (H116: GBP58.7m), representing free cash flow conversion of 91% (2016: 87%).
Clear organic growth strategy
We continue to deploy multiple initiatives for growth across our brands to help us improve customer experience, retain existing customers, increase the number of new customers and growing the value and number of products and services per customer.
Our first half growth initiatives included product innovation through the launches of WGSN's Barometer and Coloro, and Groundsure's Avista, in addition to work undertaken to build upon the new launches of 2016 - WGSN Insight, Bett Middle East and Lions Entertainment. Money20/20 Europe achieved strong growth of 42% in its second year and we announced the show's move from Copenhagen to a larger venue in Amsterdam for 2018 onwards to support its European growth ambitions. Meanwhile preparations are going well for the first edition of Money20/20 Asia which will be held in March 2018 in Singapore and we are considering launching a new Money20/20 event in mainland China in the next 24 months.
Focussed portfolio of market-leading brands underpinned by diversified and recurring revenue streams
We operate 19 market-leading brands, 16 of which are the number one in their respective markets. These brands deliver quality information which customers use to gain competitive advantage. Our customers want to access information across multiple channels and many of our most successful brands are those that both connect and inform their customers by delivering valuable information digitally and through live, content-rich events, as well as increasingly solving specific customer needs through advisory services.
We will continue to develop all our most significant brands so that customers can consume the information in the ways they prefer - whether this be live, digitally or through advisory services. The new Cannes Lions app, launched for the 2017 festival, has improved customer experience at the festival by making it simple for delegates to curate their own week and maximise the value they obtain from their attendance. The new Groundsure product Avista includes a clear next steps indicator - the Avista Action Alert. One Click Retail are extending their expertise in providing actionable insight from data analytics to connecting and informing their customers through the launch of an ecommerce forum in the second half.
Revenue by type
The Company benefits from diverse revenue streams across its brands ranging from digital subscriptions to live events to advisory. The majority of these revenue streams have recurring characteristics and benefit from the Company's focus on customer retention. Following the acquisition of both MediaLink and One Click Retail, the balance of revenues between Exhibitions & Festivals (57%) and Information Services (43%) has improved during the last 12 months, with the overall proportion of revenue generated by our top five brands decreasing slightly from 69% to 66%.
Revenue by geography
Ascential continues to grow strongly in international markets and the majority of our brands serve a global customer base.
The percentage of revenues in the last 12 months from customers based in the Americas rose to 34% (2016: 29%), driven by the growth of Money 20/20 US, WGSN and Cannes Lions, and the acquisition of MediaLink and One Click Retail and the dependence on UK markets has reduced further, with revenues coming from customers based in the UK of 33%, down from 38% in 2016. Furthermore the full year effect of the acquisitions of MediaLink and One Click Retail increases the proportion of revenue from the Americas to 39% and reduce the proportion of revenue from the UK to 31%.
Capital allocation
We continue to monitor and assess the range of brands we own, to support our strategy of focussing resources and investment on our largest brands and those with the highest growth potential. Health Service Journal was sold for GBP19.0m cash in January 2017, and the 11 other UK based Heritage Brands were sold in May 2017 for GBP23.5m (both subject to normal working capital adjustments). The sale process continues for the one remaining Heritage Brand, MEED.
MediaLink, which provides advisory and business services to media platforms and brands seeking to drive growth through better marketing, was acquired in February 2017 and is performing in line with our expectations. We continue to assess acquisition prospects to identify opportunities to own market-leading brands or products in our key end markets, as well as bolt-on opportunities to accelerate growth in the existing business.
Our June net leverage position was within our target range of between 1.5 and 2.0x at 1.7x Adjusted EBITDA following strong cash flows that funded dividends and M&A activity, as well as deleveraging in the period. The Board's dividend policy remains unchanged, targeting an annual dividend of approximately 30% of net income with one-third payable following interim results and two-thirds following final results.
Outlook
The business continues to generate significant cash flows to fund investment, dividends and acquisitions and the integration of MediaLink and One Click Retail are progressing according to plan, enhancing our offering and opening up new opportunities for growth. Furthermore the strategic actions we have taken in the last 12 months enable us to optimise the focus on our primary brands and further accelerate our product and international revenue diversification.
With our Information Services division already contributing well to our organic growth, the benefit of enhanced growth contributions coming from recently acquired brands and the investments we continue to make to enhance our products and capabilities we remain confident that we will continue to deliver leading growth rates.
We enter the second half of 2017 with positive momentum. With our current level of forward bookings and the increasing geographic diversification of our revenue streams, we are confident that we will achieve our full year expectations.
Segmental review
Exhibitions & Festivals
The Exhibitions & Festivals segment continued its strong performance in the first half of 2017 with Organic revenue growth of 8.2% and adjusted EBITDA growth of 8.9% to GBP137.0m (2016: GBP119.1m) and GBP64.5m (2016: GBP53.5m) respectively. The segment has considerable foreign currency exposure with Cannes Lions, CWIEME and Money20/20 Europe revenues denominated primarily in Euro. For this reason, reported revenues grew 15% and Adjusted EBITDA by 21% with currency effects also benefitting margins.
Cannes Lions
Cannes Lions, held each June, is the world's largest and most widely recognised international festival for creativity in the branded communications industry. Revenues increased to GBP62.9m up 7% on a constant currency Organic basis.
This revenue growth was achieved despite slightly reduced volumes of award entries and delegates reflecting the reduced participation by certain major agency customers, which was offset by growth in revenues from new participants such as technology companies and new media platforms as well as the increased sale of premium packages and value-added services.
Cannes Lions revenues are earned from delegate passes (42%), award entries (41%) and partnership and digital (15%) along with modest amounts from hotel room booking commissions (2%) covering the costs of the hotel booking system and the associated support team. The 2017 festival attracted over 10,000 paying delegates, increasingly from a wider range of participants within the industry, and over 40,000 award entries while the festival's third main revenue stream, partnership and digital, increased by 24%.
The launch of new Lions awards and adjacent festivals in recent years underpins the strategy of Cannes Lions as it seeks to expand its customer base across the full spectrum of the branded communications industry and retain its long-standing reputation as the barometer of excellence in creativity. Award entry numbers for individual Lions categories can vary year on year but the broad trends remain unchanged with the vast majority of the small year on year decline from the challenged categories of print and outdoor. We continue to regularly review award entry categories to ensure they are relevant to the industry.
Responding to customer feedback from the 2016 festival, we did not launch any new Lions award categories or adjacent festivals in 2017 and focused instead on existing categories, focusing larger areas in the City of Cannes on paying delegates and obtaining a deeper understanding of those industry participants who are in Cannes during the festival but who do not formally participate. To reflect our major customers' prior year comments, the pricing of our most popular delegate pass was increased by just 2%, Young Lions passes were reduced by 10% and award entries increased in price by just 3%. Customers continued to demand higher value delegate packages and the late award entry service, however, so we benefited from an increase in mix towards higher value products.
Going forward we are encouraged by the participation of major advertisers, partners, agency networks and the Mayor of Cannes in a newly formed advisory committee created to help shape the future of the festival and ensure it continues reflects opportunities and needs in the creative industry.
Money20/20
Money 20/20 USA is the leading US congress in the payments and financial services innovation sector, focusing on the evolution of payment and financial services through mobile, retail, marketing services, data and technology, and is held in our second half each autumn in Las Vegas. The event attracts increasing numbers of C-suite executives, with more than 1,700 attending the October 2016 edition which welcomed more than 10,000 attendees and over 500 speakers.
Following a successful launch in 2016, the second edition of the Money20/20 Europe show delivered revenues of GBP12.3m in the first half, up 42% on the previous year at constant currency with revenue from exhibition space and meeting rooms up 52%. It attracted over 5,000 attendees to Copenhagen, an increase of 36% from the previous year, making Money20/20 Europe the biggest FinTech event in Europe. To accommodate the show's anticipated growth, Money20/20 will be moving to a larger venue in Amsterdam in 2018.
The first edition of Money20/20 in Asia will be held in March 2018 in Singapore. Forward bookings are encouraging and in line with our plans. Discussions continue on the timing for a launch of the brand into mainland China.
Spring and Autumn Fair
Spring Fair is the UK's largest trade exhibition and is held at the NEC in Birmingham. It is the clear market leader in the UK's gift and homeware exhibition market. Each edition covers key buying sectors including gifts, homeware, jewellery and greetings products. Leading industry speakers and inspirational workshops improve the experience of visitors to the two shows, while show sectors are regularly edited to serve the needs of over 2,500 exhibitors.
In 2017, Spring Fair welcomed around 60,000 UK and international visitors from independent and major multiple retailers to e-commerce specialists and department stores. Revenues were GBP23.0m, a reduction of 2% reflecting the continuing challenges faced by the UK retail market particularly for importers.
Other Exhibitions & Festivals brands
Beyond the above top three brands in this segment, revenues across our other Events rose 8% to GBP38.8m, driven by an excellent performance by Bett London, which welcomed over 34,000 educators and decision makers to its flagship event in London, and solid revenue growth at CWIEME Berlin and Pure London. We were also pleased to see strong growth at Bett's second year in the Middle East with show revenues more than doubling and a return to good growth of its Brazilian edition, Educar.
Information Services
The Information Services segment delivered increased growth with continuing revenues up 5.2% on an Organic basis to GBP85.0m (2016: GBP57.1m). Reported revenue growth of 49% benefited from a six month contribution from One Click Retail and a four months contribution from MediaLink. Adjusted EBITDA of GBP24.5m for the half (2016: GBP16.6m) improved by 1.1% on an Organic basis. Margins reduced from 29.1% to 28.8% as expected reflecting the planned new product investment in Groundsure's Avista, Coloro and WGSN Barometer.
WGSN
WGSN is the leading global supplier of trend forecasts, market intelligence and insight to the fashion industry and other businesses in design-orientated consumer markets. It is the Company's largest product and represents almost half of the revenues of the Information Services segment. In the first half of 2017, WGSN grew revenues by 6% on an Organic basis to GBP36.2m and grew its subscription billings by 5%. Retention rates remained strong, up 1% to 93%.
First half growth benefited from the strong performance in WGSN Insight, a consumer trend product that was launched in Q4 of 2016. In the first half of the year, WGSN launched its new brand tracking product, WGSN Barometer and initial market feedback is encouraging.
In May 2017, Ascential and the Company's JV partner China Textile Information Center, launched Coloro, a new 3D colour system which uses logical codes and intuitive design to ensure fashion and textile professionals get the precise colour they planned for easily and accurately. The product comprises physical and digital tools and a comprehensive consulting programme to provide a new dimension of colour intelligence and a global sales campaign has now commenced to WGSN's international customer base.
Groundsure
Groundsure is a market-leading provider of environmental risk data to solicitors, conveyancers, architects and other participants in the UK residential and commercial property market. Groundsure achieved strong growth during the period with revenues up 11% year on year to GBP8.6m in the first half of 2017 against the backdrop of a decline in transactions in the UK housing market.
Its new product, Avista, was launched during the half following extensive product testing. Avista is a comprehensive yet concise residential environment search product which consolidates several searches into one easy-to-read report, and includes the Avista Action Alert which provides actionable insight with a clear next-steps indicator. A pilot scheme produced feedback that more than 70% of respondents rated the new report "valuable" or "extremely valuable".
Other Information Services brands
Revenues across our other Information Services products amounted to GBP40.2m. This represented growth of 2%, on an Organic basis, driven by strong performances from Glenigan and DeHavilland.
Other Information Services products also include One Click Retail, which joined Ascential in 2016 and MediaLink, which was acquired in February 2017. Since the businesses have been owned for less than one year, neither contributed to the Company's or the segment's Organic growth rate mentioned above.
One Click Retail is a market leader in e-commerce data measurement for Amazon, sales analytics and product search optimization for organisations in North America, Europe and Asia. One Click Retail grew revenue by 63% on the prior year, pre-acquisition, period.
MediaLink provides advisory and business services to media platforms and brands seeking to drive growth through better marketing. It serves, ultimately, the consumer goods and services segment, which the Company already addresses through leading products such as WGSN, Cannes Lions and Money20/20. It has worked with Cannes Lions' customers since 2011 where it hosts content and client-oriented meetings and events as part of the official fringe. Through the period of its initial ownership it has grown 8% and has a strong outlook for the second half of the year.
Financial Review
Overview
This Financial Review firstly addresses the key trends in continuing operations and then, as a separate section, discontinued operations comprising the Company's Heritage brands. The results of these discontinued operations, for both the current and the comparative period, are included as a single line item within profit after tax on the face of the profit and loss statement.
The results for the period are set out in the condensed consolidated statement of profit and loss and show, for continuing operations, revenue of GBP222.0m (2016: GBP176.2m), an Organic growth of 7.2%, and reported operating profit of GBP48.1m (2016: GBP37.6m). Adjusted EBITDA was GBP81.4m (2016: GBP63.2m), an Organic growth of 6.7%. The Company also delivered strong cash flow in the half with an operating cash conversion of 103% (2016: 98%) and free cash flow of GBP74.5m (2016: GBP58.7m) a conversion rate of 91% (2016: 87%).
The Company's first half is traditionally greater in terms of absolute revenue and EBITDA as it includes the Company's largest Exhibitions & Festivals products including Spring Fair, Bett, Cannes Lions and Money 20/20 Europe. In 2016 the first half generated 59% (2015: 56%) of the Company's annual revenue and 66% (2015: 61%) of its annual Adjusted EBITDA.
A core KPI and strategic goal of the Company is Organic revenue growth as this is the most efficient method of growth that measures the underlying health of the business and is a key driver of shareholder value creation. Organic revenue growth eliminates the distorting impact of acquisitions and disposals and that element of reported growth driven by changes in foreign exchange rates. It is an alternative performance measure and is discussed in more detail below.
Adjusted EBITDA is also an alternative performance measure discussed in detail below. It is used in the day-to-day management of the Company in order to aid comparisons with peer group companies, manage banking covenants and provide a reference point for assessing the operational cash generation of the Company. It eliminates items arising from portfolio investment and divestment decisions, and from changes to capital structure. Such items arise from events which are non-recurring or intermittent, and while they may generate substantial income statement amounts, do not relate to the ongoing operational performance that underpins long-term value generation.
The Company monitors its operational balance sheet efficiency with reference to operational cash conversion, defined as Free Cash Flow as a percentage of Adjusted EBITDA. The section on alternative performance measures below also defines these terms.
CONTINUING OPERATIONS
Segmental results
A summary of the operational performance of the Company across its two continuing segments is given in the table below.
Exhibitions Information Central Continuing
GBP'm & Festivals Services costs operations
---------------------- ------------- ------------ -------- ------------
H117
Revenue 137.0 85.0 - 222.0
Organic revenue
growth 8.2% 5.2% - 7.2%
Adjusted EBITDA 64.5 24.5 (7.6) 81.4
Organic Adjusted
EBITDA growth 8.9% 1.1% 6.7%
Adjusted EBITDA
margin 47.1% 28.8% 36.7%
Depreciation (2.1) (2.2) (0.7) (5.0)
---------------------- ------------- ------------ -------- ------------
Adjusted operating
profit 62.4 22.3 (8.3) 76.4
Amortisation (12.7)
Exceptional items (13.7)
Share-based payments (1.9)
---------------------- ------------- ------------ -------- ------------
Operating profit 48.1
---------------------- ------------- ------------ -------- ------------
H116
Revenue 119.1 57.1 - 176.2
Adjusted EBITDA 53.5 16.6 (6.9) 63.2
Adjusted EBITDA
margin 44.9% 29.1% 35.9%
Depreciation (1.2) (3.0) (2.6) (6.8)
---------------------- ------------- ------------ -------- ------------ Adjusted operating profit 52.3 13.6 (9.5) 56.4 Amortisation (12.9) Exceptional items (5.2) Share-based payments (0.7) ---------------------- ------------- ------------ -------- ------------ Operating profit 37.6 ---------------------- ------------- ------------ -------- ------------
Revenue
Revenue from continuing operations in the first half grew to GBP222.0m (2016: GBP176.2m), an increase of GBP45.8m. However, direct comparability was affected by the establishment of WGSN's 49% joint venture with CTIC whereby revenue of the joint venture is no longer consolidated, the acquisition of One Click Retail in August 2016 and of MediaLink in February 2017, the disposal of Naidex in July 2016, together with movements in exchange rates between the two years. Adjusting for these factors, Organic growth in revenue from continuing operations was as follows:
Year-on-year Organic revenue growth H117 H116 2016 ------------------------------ ------ ------- ------- Exhibitions & Festivals +8.2% +15.3% +12.3% Information Services +5.2% +6.2% +5.4% ------------------------------ ------ ------- ------- Continuing operations +7.2% +12.2% +9.5% ------------------------------ ------ ------- -------
Adjusted EBITDA
Adjusted EBITDA from continuing operations increased to GBP81.4m (2016: GBP63.2m) an increase of GBP18.2m on a reported basis and an expansion in Adjusted EBITDA margin of 0.8 percentage points to 36.7%. The reported growth in Adjusted EBITDA was impacted by the same factors described above. On an Organic basis Adjusted EBITDA grew by 6.7%, with Exhibitions & Festivals growing at 8.9% and Information Services by 1.1% limited by new product investment in Avista, Coloro and WGSN Barometer.
Foreign currency impact
Following the Company's acquisition of One Click Retail and MediaLink, together with the growth of Money20/20 and the disposal of the UK-based Heritage Brands, the Company's reported performance is increasingly sensitive to movements in both the euro and US dollar against pounds sterling. In the first half, sterling weakened further against both the US dollar and euro compared to H116 as shown in the table below:
Sterling exchange Weighted average
rates rate Closing rate
H117 H116 Change H117 H116 Change
------------------- ----- ----- ------- ----- ----- -------
Euro 1.14 1.26 10% 1.14 1.20 5%
US dollar 1.26 1.44 13% 1.30 1.32 2%
------------------- ----- ----- ------- ----- ----- -------
When comparing H117 and H116, changes in currency exchange rates had a favourable impact of GBP11.8m on revenue and GBP6.6m on Adjusted EBITDA. On a segmental basis, the impact was as follows:
-- Exhibitions & Festivals: GBP8.4m impact on revenue and GBP5.8m impact on Adjusted EBITDA. -- Information Services: GBP3.4m impact on revenue and GBP0.7m impact on Adjusted EBITDA.
Share-based payments
The charge for share-based payments of GBP1.9m for Continuing operations (2016: GBP0.7m) has increased from the prior period as the charge builds up to a normalised level over a three-year grant cycle. The current period charge includes the recent 2017 PSP award together with the initial grant of SAYE options in the second half of 2016.
Exceptional items
The following table sets out the exceptional items incurred by the Company that have been excluded from Adjusted EBITDA. As further explained below, the Company considers that separately identifying such items improves comparability of the financial results.
Exceptional items (GBP'm) H117 H116 --------------------------------- ----- ----- Acquisition-related contingent employment costs 12.4 1.7 Expenses related to acquisition activities 1.3 - Capital restructuring and IPO expenditure - 3.5 Exceptional items relating to continuing operations 13.7 5.2 --------------------------------- ----- -----
The acquisition-related contingent employment costs relate primarily to deferred consideration on the acquisition of Money20/20, One Click Retail and MediaLink which, absent the link to continued employment, would have been treated as consideration. Under the sale and purchase agreements approximately half the deferred consideration is contingent on both (i) the results of the business in the post-acquisition period and (ii) the continued employment of the founders. In accordance with IFRS, this element of the deferred consideration is treated as an expense recognised over the contractual service periods.
Net finance costs
The Company's adjusted net finance expense for the period was GBP5.5m (2016: GBP13.3m) with the reduction due largely to reduced post-IPO leverage and associated interest rate reductions and the absence of significant foreign exchange losses on the Company's external debt and cash balances.
Adjusted net finance expense (GBP'm) H117 H116
-------------------------------------- ------ -------
Net interest payable (3.0) (6.1)
Amortisation of loan arrangement
fees (0.7) (0.7)
Foreign exchange and fair value
gain / (loss) 0.3 (5.4)
Other finance charges (2.1) (1.1)
(5.5) (13.3)
-------------------------------------- ------ -------
In the prior period GBP16.0m of adjusting items were incurred not reflected in the table above. These were the non-recurring costs of the shareholder debt that existed prior to the IPO of GBP5.3m and the write-off of unamortised loan arrangement fees that occurred on IPO refinancing of GBP10.7m.
Taxation
The Company's total tax charge on profit from continuing operations was GBP10.6m (2016: GBP1.7m) and was made up of:
-- an adjusted tax charge of GBP17.4m up from GBP8.6m in the prior period being an effective tax rate of 25% (2016: 20%); and
-- a tax credit of GBP6.8m (2016: GBP6.9m) on adjusting items, primarily relating to the credit on the unwind of the deferred tax liability relating to acquired intangibles and the tax deductible consideration for recent US acquisitions.
The effective tax rate of 25% on Adjusted profit before tax reflects the expected rate for the full year and benefitted from a GBP3.1m credit (2016: GBP4.9m) due to the additional recognition of a deferred tax asset on US tax losses following the acquisition of MediaLink. Absent this, the effective tax rate on adjusted profit before tax would have been 28%. A net deferred tax asset of GBP20.1m (December 2016: GBP24.5m) has been recognised in respect of US tax assets at current applicable tax rates of 35% in respect of losses and 40% in respect of intangibles.
Cash tax paid in the first half was an outflow of GBP3.6m (2016: GBP0.3m) and the Company benefited by GBP4.2m in cash terms (2016: GBP4.7m) from the utilisation of historic tax losses.
The Company has a total remaining deferred tax asset of GBP48.9m (December 2016: GBP54.9m) relating to UK and US tax losses, accelerated capital allowances and US acquired intangibles and deferred consideration. This is expected to convert into cash savings over the next 15 years with the majority occurring over the next three years. The Company's deferred tax liability at June 2017 amounted to GBP28.8m (December 2016: GBP30.3m) and related to acquired intangibles.
DISCONTINUED OPERATIONS
A summary of the operational performance of the Company's discontinued operations is given in the table below with the year-on-year reduction in revenue and profit impacted by disposals part way through the first half.
GBP'm H117 H116 -------------------- ----- ------ Revenue 18.1 26.3 Adjusted EBITDA 0.2 4.1 Depreciation - (0.6) -------------------- ----- ------ Adjusted Operating profit 0.2 3.5 -------------------- ----- ------
The Company also incurred GBP2.6m of exceptional costs in separating the Heritage Brands and preparing them for sale including vendor diligence, legal fees, separation costs and write-off of leasehold improvements and made a profit of GBP2.7 on the sale of 12 of the 13 Heritage Brands.
Capital structure and the IPO refinancing
Following the Company's IPO in February 2016, the Company refinanced its borrowing facilities and entered into new term loan facilities of GBP66m, EUR171m and $96m as well as a revolving credit facility of GBP95m. Together with the net proceeds of the IPO of GBP183m the Company used these new term loan facilities to repay all amounts under the Company's former senior facilities and to cancel certain related hedging arrangements. The term loan and revolving facilities mature in February 2021, have a current rate of interest of 1.5% over LIBOR and are subject to a net leverage covenant measured at December and June each year. The covenant ratio limit is currently 4.5x Adjusted EBITDA and falls to 4.0x in December 2017. Arrangement fees of GBP5.3m were incurred and are being amortised over the five-year term of the facility.
Strong operating cash flow in the first half resulted in a reduction in the Company's leverage ratio to 1.7x at 30 June 2017 from 2.1x at 31 December 2016. The Company's leverage target is 1.5-2.0x to allow a healthy mix of dividends and cash for investment in acquisitions.
Acquisitions and disposals
Ascential's strategy is founded on organic growth driven first and foremost by a customer experience and retention mindset. Ascential frequently reviews any products that operate in more challenged end markets which might act as an anchor to the Company's overall growth rates. As part of its capital allocation process, Ascential also regularly assesses opportunities to acquire high-growth products with synergies with its existing products or operating in sectors with the potential for scale that may benefit from Ascential's know-how and infrastructure.
MediaLink
In February 2017, the Company acquired 100% of US-based media advisory and business services provider MediaLink for an initial cash consideration of $69m plus future earn outs payable in cash or, for certain elements, shares at Ascential's option. A portion of the earn-out payments are subject to the founders remaining in employment with the Company.
Heritage Brands
As part of its growth strategy to focus resources and investment on its largest brands and those with the highest growth potential, in January 2017 the Company announced that it had separated 13 Heritage Brands into a separate operating entity that were held for sale and reports the Heritage Brands as a separate segment classified as a discontinued operation.
In January 2017, the Company announced the sale of the first of the Heritage Brands, Health Service Journal to Wilmington plc for a consideration of GBP19.0m, payable in cash subject to normal working capital adjustments at completion. In May 2017, the Company announced the sale of 11 of the remaining Heritage Brands, to Metropolis International Limited for a consideration of GBP23.5m, payable in cash subject to normal working capital adjustments at completion. The sale process of the final Heritage Brand, MEED, is ongoing.
Cash flow
The Company's cash flow statement and net debt position for the first half can be summarised as follows:
GBP'm H117 H116 -------------------------------------------- ------- ------- Adjusted EBITDA 81.6 67.3 Working capital movements 2.9 (1.4) -------------------------------------------- ------- ------- Adjusted cash generated from operations 84.5 65.9 % Operating cash flow conversion 103% 98% Capital expenditure (6.4) (6.9) Tax paid (3.6) (0.3) -------------------------------------------- ------- ------- Free cash flow 74.5 58.7 -------------------------------------------- ------- ------- % Free cash flow conversion 91% 87% Exceptional costs paid (4.9) (3.5) Repayment of loan to joint venture 0.1 - Acquisition consideration paid (including earn outs) (79.0) (7.9) Disposal proceeds received 37.8 0.2 -------------------------------------------- ------- ------- Cash flow before financing activities 28.5 47.5 Net interest paid (3.3) (16.7) Dividends paid (12.8) - Proceeds of issue of shares net of expenses - 189.1 Net debt drawdown / (repayment) 0.9 (189.4) -------------------------------------------- ------- ------- Net cash flow 13.3 30.5 Opening cash balance 61.9 44.4 FX movements (0.6) 6.8 -------------------------------------------- ------- ------- Closing cash balance 74.6 81.7 Borrowings (290.1) (280.9) Capitalised arrangement fees 3.8 4.9 Derivative financial instruments 0.3 0.4 -------------------------------------------- ------- ------- Net Debt (211.4) (193.9) -------------------------------------------- ------- -------
In the first half of 2017, the Company generated Adjusted operating cash flow of GBP84.5m (2016: GBP65.9m) an increase of 28%, due to the strong operational performance of the business. After capex and tax, the Company generated free cash flow of GBP74.5m (2016: GBP58.7m) an increase of 27%, which was used to fund dividends and interest payments, M&A and exceptional items with the balance reducing net indebtedness.
A major feature of the Company's cash flow in the first half of the prior year was the IPO which generated gross proceeds of GBP200.0m or GBP189.1m net of expenses which was used to reduce the Company's indebtedness - a key driver of the reduced cash outflow on interest.
Earnings per share
Earnings per share ("EPS") has been presented on both a statutory and Proforma basis. The Proforma basis, used in 2016, is based on the 400m shares in issue upon IPO (as opposed to the statutory basis which is an average including the pre-IPO period) and is therefore a more relevant comparator for ongoing shareholders of the Company. Total reported basic and diluted EPS for continuing and discontinued operations is 7.1 pence per share (2016: 2.5 pence per share).
Adjusted diluted EPS for Continuing operations of 13.3 pence per share is 55% ahead of the 8.6 pence per share recorded on a proforma basis for the first half of 2016 driven by the growth in Adjusted EBITDA, the reduction in depreciation expense and in net interest payable offset by an increase in the effective tax rate from 20% to 25%.
Total Adjusted diluted EPS of 13.4 pence per share is also substantially ahead of 9.3 pence per share recorded for 2016 on a proforma and reported basis driven by the above factors.
Dividends
The Board's dividend policy is to target an annual dividend of approximately 30% of net income payable one-third following interim results and two-thirds following final results. Accordingly, the Board has declared an interim dividend of 1.8 pence per share (2016: 1.5 pence per share interim, 3.2 pence per share final) which will be payable on 29 September 2017 to ordinary shareholders on the register as of the close of business on 1 September 2017.
Alternative Performance Measures
The Company aims to maximise shareholder value by optimising potential for return on capital through strategic investment and divestment, by ensuring the Company's capital structure is managed to support both strategic and operational requirements, and by delivering returns through a focus on organic growth and operational discipline. The Board considers it helpful to provide, where practicable, performance measures that distinguish between these different factors - these are also the measures that the Board uses to assess the performance of the Company. Accordingly, the interim report presents the following non-GAAP measures alongside standard accounting terms as prescribed by IFRS and the Companies Act, in order to provide this useful additional information.
Adjusted Profit Measures
The Company uses Adjusted profit measures to assist readers in understanding underlying operational performance. These measures exclude income statement items arising from portfolio investment and divestment decisions, and from changes to capital structure. Such items arise from events which are non-recurring or intermittent, and while they may generate substantial income statement amounts, do not relate to the ongoing operational performance that underpins long-term value generation. The income statement items that are excluded from Adjusted profit measures are referred to as Adjusting items.
Both Adjusted profit measures and Adjusting items are presented together with statutory measures on the face of the profit and loss statement. In addition, the Company presents a non-GAAP profit measure, Adjusted EBITDA, in order to aid comparisons with peer group companies and provide a reference point for assessing the operational cash generation of the Company. Adjusted EBITDA is defined as Adjusted Operating Profit before depreciation. The Company measures operational profit margins with reference to Adjusted EBITDA.
Adjusting items are not a defined term under IFRS, so may not be comparable to similar terminology used in other financial statements. Details of the charges and credits presented as Adjusting items are set out in note 4 to the interim financial statements.
The basis for treating these items as Adjusting is as follows:
Exceptional items
Exceptional items are recorded in accordance with the Company's policy set out in note 4 to the interim financial statements. They arise from both portfolio investment and divestment decisions, and from changes to the Company's capital structure, and so do not reflect current operational performance.
Amortisation of intangible assets acquired through business combinations
Charges for amortisation of acquired intangibles arise from the purchase consideration of a number of separate acquisitions. These acquisitions are portfolio investment decisions that took place at different times over several years, and so the associated amortisation does not reflect current operational performance.
Share based payments
As a result of the IPO a number of employee share schemes were introduced in 2016. As a result, there is a lack of comparability between periods in respect of share scheme costs - particularly as the income statement charge builds up to a normalised level over a three year period. As this arises from a change triggered by the IPO change in capital structure, these costs have been treated as Adjusting items.
Gain on disposal
Gains on disposal of businesses arise from divestment decisions that are part of strategic portfolio management, and do not reflect current operational performance.
Finance costs
Certain elements of finance costs are incurred as a result of debt refinancing and are therefore a result of changes to the Company's capital structure. In addition, part of the pre-IPO Shareholder debt was converted to equity, and as a result there is a lack of comparability between periods in respect of the interest previously incurred on this Shareholder debt. As this arises from a change triggered by the IPO change in capital structure, these costs have been treated as Adjusting items.
Tax related to adjusting items
The elements of the overall Company tax charge relating to the above Adjusting items are also treated as Adjusting. These elements of the tax charge are calculated with reference to the specific tax treatment of each individual Adjusting item, taking into account its tax deductibility, the tax jurisdiction concerned, and any previously recognised tax assets or liabilities.
Adjusted Cash Flow Measures
The Company uses Adjusted cash flow measures for the same purpose as Adjusted profit measures, in order to assist readers of the accounts in understanding the ongoing operational performance of the Company. The two measures used are Adjusted Cash Generated from Operations, and Free Cash Flow.
These are reconciled to IFRS measures as follows:
GBP'm H117 H116 ------------------------------------------- ---- ---- Cash generated from operations 71.4 62.4 Add back: acquisition-related contingent employment cash flow 8.2 - Add back: other exceptional cash flow 4.9 3.5 ------------------------------------------- ---- ---- Adjusted cash generated from operations 84.5 65.9 ------------------------------------------- ---- ---- GBP'm H117 H116 ------------------------------------------- ----- ----- Net cash from operating activities 67.8 62.1 Add back: acquisition-related contingent employment cash flow 8.2 - Add back: other exceptional cash flow 4.9 3.5 Less: capital expenditure (6.4) (6.9) Free cash flow 74.5 58.7 ------------------------------------------- ----- -----
The Company monitors its operational balance sheet efficiency with reference to operational cash conversion, defined as Free Cash Flow as a percentage of Adjusted EBITDA.
Organic Growth Measures
In order to assess whether the Company is achieving its strategic goal of driving organic growth it is helpful to compare like-for-like operational results between periods. Income statement measures, both Adjusted and statutory, can be significantly affected by the following factors which mask like-for-like comparability:
-- Acquisitions and disposals of businesses lead to a lack of comparability between periods due to consolidation of only part of a year's results for these businesses.
-- Changes in exchange rates used to record the results causes a lack of comparability between periods as equivalent local currency amounts are recorded at different sterling amounts in different periods.
-- Event timing differences between periods. The Company has no biennial events, but if and when annual events are held at different times of year this can affect the comparability of half-year results. There were no such timing differences in the current or prior period.
The Company therefore defines Organic growth measures, which are calculated with the following adjustments as set out in the table below:
-- Results of acquired and disposed businesses are excluded where the Company results include only part-period results in either current or prior periods.
-- Prior year results are restated at current year exchange rates.
-- Prior year results are adjusted such that comparative results of events that have been held at different times of year are included in the same period as the current year results.
Exhibitions
& Information Central Continuing
GBP'm Festivals Services costs operations
---------------------- ------------ ------------ -------- ------------
Revenue
H117 - reported 137.0 85.0 - 222.0
Exclude acquisitions
and disposals - (23.8) - (23.8)
---------------------- ------------ ------------ -------- ------------
H117 - Organic
basis 137.0 61.2 - 198.2
---------------------- ------------ ------------ -------- ------------
Organic revenue
growth 8.2% 5.2% - 7.2%
H116 - reported 119.1 57.1 - 176.2
Exclude acquisitions
and disposals (0.8) (2.3) - (3.1)
Currency adjustment 8.4 3.4 - 11.8
---------------------- ------------ ------------ -------- ------------
H116 - Organic
basis 126.7 58.2 - 184.9
---------------------- ------------ ------------ -------- ------------
Adjusted EBITDA
H117 - reported 64.5 24.5 (7.6) 81.4
Exclude acquisitions
and disposals - (8.6) - (8.6)
H117 - Organic
basis 64.5 15.9 (7.6) 72.8
---------------------- ------------ ------------ -------- ------------
Organic EBITDA
growth 8.9% 1.1% 6.7%
H116 - reported 53.5 16.6 (6.9) 63.2
Exclude acquisitions
and disposals (0.1) (1.6) - (1.7)
Currency adjustment 5.8 0.7 0.1 6.6
H116 - Organic
basis 59.2 15.7 (6.8) 68.1
---------------------- ------------ ------------ -------- ------------
Proforma EPS
Changes to the Company's capital structure affecting the number of shares in issue will affect the comparability of earnings per share between periods. In order to present a consistent measure of earnings between periods, the Company presents Proforma measures of EPS in which major changes to the number of shares in issue are presented as if they had occurred on the first day of the comparative period. In presenting the H116 comparative figures, the IPO which completed on 12 February 2016 is treated as such a major change, and so accordingly Proforma EPS is calculated using a weighted average number of shares as if the IPO had occurred at the beginning of the H116 financial period.
Glossary of Alternative Performance Measures
Term Description
------------------- ------------------------------------------
Adjusted EBITDA Adjusted operating profit excluding
depreciation
------------------- ------------------------------------------
Adjusted EBITDA Adjusted EBITDA as a percentage
margin of Revenue
------------------- ------------------------------------------
Adjusted effective Adjusted tax charge expressed
tax rate as a percentage of Adjusted profit
before tax
------------------- ------------------------------------------
Adjusted EPS EPS calculated with reference
to Adjusted Profit for the period
------------------- ------------------------------------------
Adjusted operating Operating profit excluding Adjusting
profit Items
------------------- ------------------------------------------
Adjusted profit Profit before tax excluding Adjusting
before tax Items
------------------- ------------------------------------------
Adjusted tax Tax charge excluding Adjusting
charge Items
------------------- ------------------------------------------
Cash conversion Free cash flow expressed as a
percentage of Adjusted EBITDA
------------------- ------------------------------------------
Effective tax Tax charge expressed as a percentage
rate of Profit before tax
------------------- ------------------------------------------
Exceptional items Items within Operating profit
separately identified in accordance
with Company accounting policies
------------------- ------------------------------------------
Free cash flow Cash flows before exceptionals,
portfolio investments and divestments,
and financing
------------------- ------------------------------------------
Net debt leverage The ratio of Net debt to Adjusted
EBITDA
------------------- ------------------------------------------
Organic revenue Revenue growth on a like-for-like
growth basis
------------------- ------------------------------------------
Organic EBITDA Adjusted EBITDA growth on a like-for-like
growth basis
------------------- ------------------------------------------
Proforma Adjusted Adjusted EPS calculated using
EPS a proforma number of shares,
as if the IPO had occurred at
the beginning of 2016
------------------- ------------------------------------------
Proforma EPS EPS calculated using a proforma
number of shares, as if the IPO
had occurred at the beginning
of 2016
------------------- ------------------------------------------
Principal Risks and Uncertainties
The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Company's performance during the remainder of its financial year remain unchanged from those identified in the 2016 Annual Report and Accounts available on our website www.ascential.com.
Cautionary statement
Certain statements in this interim management report constitute, or may be deemed to constitute, forward looking statements (including beliefs or opinions). Any statement in this interim management report that is not a statement of historical fact including, without limitation those regarding the Company's future expectations, operations, financial performance, financial condition and business, is a forward looking statement. Such forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risk and uncertainties include, among other factors, changing economic financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this results announcement. As a result you are cautioned not to place reliance on such forward looking statements.
Except as is required by the Listing Rules, Disclosure and Transparency Rules and applicable laws, no undertaking is given to update the forward-looking statements contained in this interim management report, whether as a result of new information, future events or otherwise.
Nothing in this interim management report should be construed as a profit forecast.
This interim management report has been prepared for the Company as a whole and therefore gives greater emphasis to those matters which are significant to Ascential plc and its subsidiary undertakings when viewed as whole.
Responsibility statement
We confirm that to the best of our knowledge:
a. The Condensed set of Consolidated Financial Statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;
b. The interim management report includes the following information as required by DTR 4.2.7R:
i. An indication of important events that have occurred during the first six months of the financial year, and their impact on the Condensed set of Consolidated Financial Statements; and
ii. A description of the principal risks and uncertainties for the remaining six months of the year.
c. The interim management report includes the following information as required by DTR 4.2.8R:
i. Related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company in that period; and
ii. Any changes in the related party transactions described in the 2016 Annual report that could have material effect on the financial position or performance of the Company in the current period.
By order of the Board
Duncan Painter Mandy Gradden Chief Executive Officer Chief Financial Officer
21 July 2017
Independent Review Report to Ascential plc
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Condensed Consolidated Profit and Loss, the Condensed Consolidated Statement of Other Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Statement of Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
John Bennett
for and on behalf of KPMG LLP
Chartered Accountants
London, United Kingdom
21 July 2017
Condensed Consolidated Statement of Profit and Loss
Six months to Six months to Year to 31 December
30 June 2017 30 June 2016 2016
Unaudited Unaudited Audited
------------------------------ ------------------------------ -------------------------------
Adjusting Adjusting Adjusting
Items Items Items
Adjusted Note Adjusted Note Adjusted Note
(GBP million) Note Results 4 Total Results 4 Total Results 4 Total
--------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Revenue 2,3 222.0 - 222.0 176.2 - 176.2 299.6 - 299.6
Cost of sales (77.1) - (77.1) (60.6) - (60.6) (102.0) - (102.0)
Sales, marketing
and
administrative
expenses (68.5) (28.3) (96.8) (59.2) (18.8) (78.0) (114.6) (50.9) (165.5)
Operating profit 76.4 (28.3) 48.1 56.4 (18.8) 37.6 83.0 (50.9) 32.1
--------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Adjusted EBITDA 81.4 - 81.4 63.2 - 63.2 95.9 - 95.9
Depreciation
and amortisation (5.0) (12.7) (17.7) (6.8) (12.9) (19.7) (12.9) (28.8) (41.7)
Exceptional
items - (13.7) (13.7) - (5.2) (5.2) - (20.7) (20.7)
Share-based
payments - (1.9) (1.9) - (0.7) (0.7) - (1.4) (1.4)
--------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Operating profit 76.4 (28.3) 48.1 56.4 (18.8) 37.6 83.0 (50.9) 32.1
------------------ ----- --------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Share of gain
in
equity-accounted
investee, net
of tax 0.1 - 0.1 (0.1) - (0.1) (0.1) - (0.1)
Finance costs 5 (5.9) - (5.9) (21.6) (16.0) (37.6) (28.0) (16.0) (44.0)
Finance income 5 0.4 - 0.4 8.3 - 8.3 10.2 - 10.2
Profit/(loss)
before taxation 71.0 (28.3) 42.7 43.0 (34.8) 8.2 65.1 (66.9) (1.8)
Taxation 6 (17.4) 6.8 (10.6) (8.6) 6.9 (1.7) (10.9) 24.3 13.4
Profit from
continuing
operations 53.6 (21.5) 32.1 34.4 (27.9) 6.5 54.2 (42.6) 11.6
(Loss)/profit
from
discontinued
operation net
of tax 7 0.2 (3.9) (3.7) 2.9 (1.3) 1.6 8.0 (4.0) 4.0
--------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Profit for
the period 53.8 (25.4) 28.4 37.3 (29.2) 8.1 62.2 (46.6) 15.6
--------- ---------- ------- --------- ---------- ------- --------- ---------- --------
Proforma earnings
per share
(pence) 9
Continuing
and discontinued
operations
- Basic 13.5 (6.4) 7.1 9.3 (7.3) 2.0 15.6 (11.7) 3.9
- Diluted 13.4 (6.3) 7.1 9.3 (7.3) 2.0 15.5 (11.6) 3.9
Continuing
operations
only
- Basic 13.4 (5.4) 8.0 8.6 (7.0) 1.6 13.6 (10.7) 2.9
- Diluted 13.3 (5.3) 8.0 8.6 (7.0) 1.6 13.5 (10.6) 2.9
Earnings per
share (pence) 9
Continuing
and discontinued
operations
- Basic 13.5 (6.4) 7.1 11.5 (9.0) 2.5 17.1 (12.8) 4.3
- Diluted 13.4 (6.3) 7.1 11.5 (9.0) 2.5 17.1 (12.8) 4.3
Condensed Consolidated Statement of Other Comprehensive Income
Six months Six months Year to
to to 31
30 June 30 June December
2017 2016 2016
(GBP million) Unaudited Unaudited Audited
----------- ----------- ----------
Profit for the period 28.4 8.1 15.6
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss:
Foreign exchange translation
differences recognised in
equity (10.8) (7.5) (10.6)
----------- ----------- ----------
Total comprehensive income
for the period 17.6 0.6 5.0
----------- ----------- ----------
Total comprehensive income
attributable to:
Continuing operations 22.2 (4.1) (4.2)
Discontinued operations (4.6) 4.7 9.2
----------- ----------- ----------
Total comprehensive income
for the period 17.6 0.6 5.0
----------- ----------- ----------
Condensed Consolidated Statement of Financial Position
30
30 June June 31 December
2017 2016 2016
(GBP million) Note Unaudited Unaudited Audited
---------- ---------- ------------
Assets
Non-current assets
Intangible assets 692.0 663.1 651.6
Property, plant and equipment 13.9 8.4 11.4
Investments 5.1 0.4 5.0
Other receivables 0.4 0.6 0.6
Derivative financial assets - 0.1 0.1
Deferred tax assets 13 48.9 41.8 54.9
760.3 714.4 723.6
---------- ---------- ------------
Current assets
Inventories 14.2 13.5 16.9
Trade and other receivables 63.5 67.2 59.6
Derivative financial assets 0.3 0.3 0.3
Cash and cash equivalents 12 74.6 81.7 61.9
152.6 162.7 138.7
Assets of disposal group classified
as held for sale 22.3 - 72.0
Current assets 174.9 162.7 210.7
---------- ---------- ------------
Total assets 935.2 877.1 934.3
---------- ---------- ------------
Liabilities
Current liabilities
Trade and other payables 182.3 172.7 173.0
Provisions 2.8 2.8 1.7
Current tax liabilities 14.9 9.1 6.9
200.0 184.6 181.6
Liabilities of disposal group
classified as held for sale 9.6 - 23.7
Current liabilities 209.6 184.6 205.3
---------- ---------- ------------
Non-current liabilities
External borrowings 12 286.3 276.0 286.0
Provisions 1.7 0.2 1.6
Deferred tax liabilities 13 28.8 39.3 30.3
Other non-current liabilities 40.6 14.9 49.7
Total non-current liabilities 357.4 330.4 367.6
---------- ---------- ------------
Total liabilities 567.0 515.0 572.9
---------- ---------- ------------
Net assets 368.2 362.1 361.4
---------- ---------- ------------
Capital and reserves
Share capital 4.0 4.0 4.0
Merger reserve 9.2 9.2 9.2
Group restructure reserve 157.9 157.9 157.9
Translation reserve (28.2) (14.3) (17.4)
Retained earnings 225.3 205.3 207.7
Total equity 368.2 362.1 361.4
---------- ---------- ------------
Condensed Consolidated Statement of Changes in Equity
Group
Share Share Merger Capital restructure Translation Retained
(GBP million) capital(i) premium reserve(i) reserve reserve reserve earnings Total
----------- --------- ------------ --------- ------------ ------------ ---------- --------
At 1 January
2016 7.9 - 9.2 - - (6.8) (279.5) (269.2)
Profit for
the period - - - - - - 8.1 8.1
Foreign exchange
translation
differences
recognised
in equity - - - - - (7.5) - (7.5)
Share-based
payments - - - - - - 0.6 0.6
Group
restructure(ii) 22.1 252.9 - 8.8 157.9 - - 441.7
Issue of
shares(iii) 10.0 190.0 - - - - - 200.0
Share issue
costs(iii) - (11.6) - - - - - (11.6)
Issue of
shares(iv) 0.1 - - - - - (0.1) -
Capital
reduction(v) (36.1) (431.3) - (8.8) - - 476.2 -
At 30 June
2016 Unaudited 4.0 - 9.2 - 157.9 (14.3) 205.3 362.1
----------- --------- ------------ --------- ------------ ------------ ---------- --------
Profit for
the period - - - - - - 7.5 7.5
Share-based
payments - - - - - - 0.9 0.9
Foreign exchange
translation
differences
recognised
in equity - - - - - (3.1) - (3.1)
Dividends
(note 8) - - - - - - (6.0) (6.0)
At 31 December
2016 Audited 4.0 - 9.2 - 157.9 (17.4) 207.7 361.4
----------- --------- ------------ --------- ------------ ------------ ---------- --------
Profit for
the period - - - - - - 28.4 28.4
Share-based
payments - - - - - - 1.9 1.9
Taxation on
share-based
payments - - - - - - 0.1 0.1
Foreign exchange
translation
differences
recognised
in equity - - - - - (10.8) - (10.8)
Dividends
(note 8) - - - - - - (12.8) (12.8)
----------- --------- ------------ --------- ------------ ------------ ---------- --------
At 30 June
2017 Unaudited 4.0 - 9.2 - 157.9 (28.2) 225.3 368.2
----------- --------- ------------ --------- ------------ ------------ ---------- --------
(i) Share capital and merger reserve at 1 January 2016 reflect the statutory share capital and merger reserve of Ascential plc on 8 February 2016, when a restructure of the Group took place. Refer to the 2016 Annual Report for further details.
(ii) The restructure of the Group between 8 and 12 February 2016 resulted in the Company issuing 300 million ordinary GBP0.10 shares to become the ultimate parent of the Group, and to convert existing shareholder debt to equity. This resulted in the recognition of GBP252.9 million in share premium, GBP8.8m in the capital reserve and GBP157.9 million in a group restructure reserve.
(iii) At IPO 100 million additional ordinary GBP0.10 shares were allotted and issued at a price of GBP2.00 per share, representing a premium of GBP1.90 per share. GBP11.6 million of share issue costs were incurred. The premium was recorded in the Company's share premium account.
(iv) On 8 March 2016, 542.5 million ordinary GBP0.10 shares were issued to employees under the Share Incentive Plan.
(v) On 8 June 2016, the Company completed a reduction of its share capital, whereby its nominal share capital was reduced to approximately GBP4.0 million, the amount standing to the share premium account was cancelled, and 876,266,690 deferred shares of GBP0.01 each (which were issued by way of a bonus issue on 7 June 2016 for the purpose of capitalising the Company's capital reserve) were cancelled. These steps resulted in distributable reserves of approximately GBP476.2 million.
Condensed Consolidated Statement of Cash Flows
Six Six
months months Year
to to to 31
30 June 30 June December
2017 2016 2016
(GBP million) Note Unaudited Unaudited Audited
---------- ---------- ----------
Cash flow from operating
activities
Profit before taxation 42.7 10.3 3.5
Adjustments for:
Amortisation of intangible
assets acquired through business
combinations 4 12.7 14.3 31.3
Amortisation of software
intangible fixed assets 2.9 5.5 10.2
Depreciation of tangible
fixed assets 2.1 1.8 4.5
Gain on disposal of business
operations and investments 11 (2.7) - -
Acquisition-related contingent
employment costs 4 12.4 1.7 15.3
Share-based payments 2.2 0.6 1.5
Share of (gain)/loss in equity-accounted
investee, net of tax (0.1) 0.1 0.1
Finance costs 5 5.9 37.6 44.0
Finance income 5 (0.4) (8.3) (10.2)
---------- ---------- ----------
77.7 63.6 100.2
---------- ---------- ----------
Changes in:
Inventories 2.7 4.5 1.3
Receivables 2.5 (3.2) 0.2
Payables, net of interest
payable (12.2) (3.0) (5.5)
Provisions 0.7 0.5 (0.3)
---------- ---------- ----------
Cash generated from operations 71.4 62.4 95.9
---------- ---------- ----------
Cash generated from operations
before exceptional operating
items 84.5 65.9 107.5
Cash outflows for acquisition-related
contingent employment costs (8.2) - (4.0)
Cash flows from exceptional
operating items (4.9) (3.5) (7.6)
---------- ---------- ----------
Cash generated from operations 71.4 62.4 95.9
---------- ---------- ----------
Income tax paid (3.6) (0.3) (3.5)
---------- ---------- ----------
Net cash generated from operating
activities 67.8 62.1 92.4
---------- ---------- ----------
Cash flow from investing
activities
Acquisition of business,
net of cash acquired (70.8) (7.9) (39.4)
Acquisition of investments 0.1 - (4.5)
Acquisition of software intangible
fixed assets and tangible
fixed assets (6.4) (6.9) (13.1)
Disposal of business operations
and investments 11 37.8 0.2 0.2
---------- ---------- ----------
Net cash used in investing
activities (39.3) (14.6) (56.8)
---------- ---------- ----------
Cash flow from financing
activities
Proceeds from external borrowings 12 26.5 265.2 265.2
Repayment of external borrowings 12 (25.6) (454.6) (454.6)
Proceeds from issue of shares - 200.0 200.0
Transaction costs related
to issue of shares - (10.9) (11.5)
Interest paid (3.3) (16.7) (20.8)
Dividend paid (12.8) - (6.0)
---------- ---------- ----------
Net cash used in financing
activities (15.2) (17.0) (27.7)
---------- ---------- ----------
Net increase in cash and
cash equivalents 13.3 30.5 7.9
---------- ---------- ----------
Cash and cash equivalents
at the beginning of the period 61.9 44.4 44.4
Effect of exchange rate fluctuations (0.6) 6.8 9.6
---------- ---------- ----------
Cash and cash equivalents
at the end of the period 74.6 81.7 61.9
---------- ---------- ----------
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation
Ascential plc (the "Company") is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. These non-statutory condensed consolidated interim financial statements for the six months ended 30 June 2017 comprise the Company and its subsidiaries and were approved by the Board of Directors on 21 July 2017. The condensed consolidated interim financial statements have been prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" (IAS 34) as adopted by the European Union.
The condensed consolidated interim financial statements have been prepared on a going concern basis. On the basis of current financial projections and facilities available and after considering sensitivities, the Directors of the Company are confident that the Group has sufficient resources for its operational needs and will remain in compliance with the financial covenants in its bank facilities for at least the next 12 months.
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those set out in the Group's Annual Report and Accounts for the year ended 31 December 2016. No material new standards, amendments to standards or interpretations are effective in the period ending 31 December 2017.
The following standards have been published, but not yet applied: IFRS 9 "Financial Instruments", IFRS 15 "Revenue from Contracts with Customers" and IFRS 16 "Leases".
The annual consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") and the Companies Act 2006 applicable to companies reporting under IFRS. These condensed consolidated half-yearly financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report and Accounts 2016. Those accounts were reported upon by the Group's auditors and delivered to the registrar of companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. The Annual Report and Accounts 2016 are available upon request from the Company's registered office at The Prow, 1 Wilder Walk, London, W1B 5AP, United Kingdom or at www.ascential.com.
2. Revenue seasonality
The Group's results of operations are impacted by seasonality. Revenue in Exhibitions & Festivals is recognised when an event takes place. Exhibitions & Festivals revenue is therefore seasonal, with revenue typically reaching its highest levels during the first half of each calendar year when some of the Group's largest events take place. Information Services primarily generates subscription revenue which is recognised rateably over the life of the subscription contract. Consequently, there is less seasonal fluctuation in the revenue of this reportable segment.
The following table shows the percentage of the continuing operations Group's revenue and Adjusted EBITDA by half year in 2016:
Adjusted
Revenue EBITDA
-------- ---------
Year ended 31 December 2016
First half 58.8% 65.9%
Second half 41.2% 34.1%
3. Operating segments
The Group has three reportable segments under IFRS 8 Operating Segments. In addition, there is a Group corporate function providing central services including finance, management and IT services to the Group's reportable segments. The reportable segments offer different products and services, and are managed separately because they require different capabilities, technology and marketing strategies. For each of the reportable segments, the Board (the chief operating decision maker) reviews internal management reports on a monthly basis.
The following summary describes the operations in each of the Group's reportable segments:
-- Exhibitions & Festivals: organiser of market-leading exhibitions, congresses and festivals.
-- Information Services: produces intelligence, analysis and forecasting tools, subscription content including real-time online resources, live events and awards as well as advisory services, across a number of industry sectors including fashion, retail, property, construction and politics.
-- Discontinued operation: the disposal group of 13 Heritage Brands previously formed part of the Information Services segment before it was separately classified as held for sale and a discontinued operation.
Information regarding the results of each reportable segment is included below. Reportable segment profits are measured at an adjusted operating profit level, representing reportable segment Adjusted EBITDA, less depreciation costs and amortisation in respect of software intangibles, without allocation of Central costs. This is the measure included in the internal management reports that are reviewed by the Board. Reportable segment Adjusted EBITDA and reportable segment Adjusted operating profit are used to measure performance as management believes that such information is the most relevant in evaluating the results of certain reportable segments relative to other comparable entities. Total assets and liabilities for each reportable segment are not disclosed because they are not provided to the Board on a regular basis. Total assets and liabilities are internally reviewed on a Group basis.
Six months ended 30 June 2017, Unaudited
Discontinued
Continuing Operation
Exhibitions Information Central Operations Note
(GBP million) & Festivals Services Costs Total 7 Total
------------- ------------ -------- ------------ ------------- -------
Revenue 137.0 85.0 - 222.0 18.1 240.1
Adjusted EBITDA 64.5 24.5 (7.6) 81.4 0.2 81.6
Depreciation and
amortisation of
tangible fixed
assets and software
intangibles (2.1) (2.2) (0.7) (5.0) - (5.0)
------------- ------------ -------- ------------ ------------- -------
Adjusted operating
profit 62.4 22.3 (8.3) 76.4 0.2 76.6
Amortisation of
intangible assets
acquired through
business combinations (12.7) - (12.7)
Exceptional items
(note 4) (13.7) 0.1 (13.6)
Share-based payments
(note 4) (1.9) (0.3) (2.2)
------------- ------------ -------- ------------ ------------- -------
Operating profit 48.1 - 48.1
Share of gain
in equity-accounted
investee, net
of tax 0.1 - 0.1
Net finance costs (5.5) - (5.5)
------------- ------------ -------- ------------ ------------- -------
Profit before
tax 42.7 - 42.7
------------- ------------ -------- ------------ ------------- -------
Total assets 912.9 22.3 935.2
------------- ------------ -------- ------------ ------------- -------
Exceptional items of GBP13.7 million include GBP0.8 million and GBP12.9 million, which are attributable to Exhibitions & Festivals and Information Services respectively.
Six months ended 30 June 2016, Unaudited
Discontinued
Continuing Operation
Exhibitions Information Central Operations Note
(GBP million) & Festivals Services Costs Total 7 Total
------------- ------------ -------- ------------ ------------- -------
Revenue 119.1 57.1 - 176.2 26.3 202.5
Adjusted EBITDA 53.5 16.6 (6.9) 63.2 4.1 67.3
Depreciation and
amortisation of
tangible fixed
assets and software
intangibles (1.2) (3.0) (2.6) (6.8) (0.6) (7.4)
------------- ------------ -------- ------------ ------------- -------
Adjusted operating
profit 52.3 13.6 (9.5) 56.4 3.5 59.9
Amortisation of
intangible assets
acquired through
business combinations (12.9) (1.4) (14.3)
Exceptional items
(note 4) (5.2) - (5.2)
Share-based payments
(note 4) (0.7) - (0.7)
------------- ------------ -------- ------------ ------------- -------
Operating profit 37.6 2.1 39.7
Share of loss
in equity-accounted
investee, net
of tax (0.1) - (0.1)
Net finance costs (29.3) - (29.3)
------------- ------------ -------- ------------ ------------- -------
Profit before
tax 8.2 2.1 10.3
------------- ------------ -------- ------------ ------------- -------
Total assets 877.1 - 877.1
------------- ------------ -------- ------------ ------------- -------
Exceptional items of GBP5.2 million includes GBP1.7 million attributable to Exhibitions & Festivals.
Year ended 31 December 2016, Audited
Discontinued
Continuing Operation
Exhibitions Information Central Operations Note
(GBP million) & Festivals Services Costs Total 7 Total
------------- ------------ -------- ------------ ------------- -------
Revenue 180.0 119.6 - 299.6 57.9 357.5
Adjusted EBITDA 73.5 35.1 (12.7) 95.9 11.6 107.5
Depreciation and
amortisation of
tangible fixed
assets and software
intangibles (3.3) (5.7) (3.9) (12.9) (1.8) (14.7)
------------- ------------ -------- ------------ ------------- -------
Adjusted operating
profit 70.2 29.4 (16.6) 83.0 9.8 92.8
Amortisation of
intangible assets
acquired through
business combinations (28.8) (2.5) (31.3)
Exceptional items
(note 4) (20.7) (1.9) (22.6)
Share-based payments
(note 4) (1.4) (0.1) (1.5)
------------- ------------ -------- ------------ ------------- -------
Operating profit 32.1 5.3 37.4
Share of loss
in equity-accounted
investee, net
of tax (0.1) - (0.1)
Net finance costs (33.8) - (33.8)
------------- ------------ -------- ------------ ------------- -------
(Loss)/profit
before tax (1.8) 5.3 3.5
------------- ------------ -------- ------------ ------------- -------
Total assets 862.3 72.0 934.3
------------- ------------ -------- ------------ ------------- -------
Exceptional items of GBP20.7 million include GBP10.4 million and GBP6.1 million, which are attributable to Exhibitions & Festivals and Information Services respectively.
4. Adjusting items
Adjusted items are those which are considered significant by virtue of their nature, size or incidence and are presented separately in the income statement to enable a full understanding of the Group's financial performance. Adjusting items are not a defined term under IFRS and include the share based payment charge, amortisation of intangibles acquired through business combinations and exceptional items such as costs incurred for acquisitions and disposals, integration, non-recurring business restructuring and capital restructuring. Adjusting items included in continuing operating profit are:
Six months Six months Year to
to 30 June to 30 June 31 December
2017 2016 2016
(GBP million) Unaudited Unaudited Audited
------------ ------------ -------------
Continuing operations
Acquisition - related contingent employment costs 12.4 1.7 15.3
Expenses related to acquisition and disposal activities 1.3 - 1.7
Capital restructuring & IPO costs - 3.5 3.7
------------ ------------ -------------
Exceptional items 13.7 5.2 20.7
Amortisation of intangibles acquired through business combinations 12.7 12.9 28.8
Share based payment 1.9 0.7 1.4
------------ ------------ -------------
Adjusting items in continuing operating profit 28.3 18.8 50.9
------------ ------------ -------------
The acquisition-related contingent employment costs relate primarily to deferred consideration on the acquisition of Money20/20, One Click Retail and MediaLink which, absent the link to continued employment, would have been treated as consideration. Under the sale and purchase agreements approximately half the deferred consideration is contingent on both (i) the results of the business in the post-acquisition period and (ii) the continued employment of the founders. The current year expenses related to acquisition activities are transaction and integration costs for the MediaLink business combination.
Adjusting items relating to Finance costs are detailed in note 5 and adjusting items relating to Discontinued operations are detailed in note 7.
5. Finance costs and finance income
Six months to 30 June 2017 Six months to 30 June 2016 Year to 31 December 2016
(GBP million) Unaudited Unaudited Audited
--------------------------- --------------------------- -------------------------
Interest on bank deposits 0.1 0.1 0.1
Foreign exchange gain on cash
and cash equivalents 0.3 5.5 7.4
Fair value gain on derivatives - 2.7 2.7
--------------------------- --------------------------- -------------------------
Finance income 0.4 8.3 10.2
--------------------------- --------------------------- -------------------------
Interest payable on external
borrowings (3.1) (6.2) (10.1)
Foreign exchange loss on
borrowings - (13.4) (13.4)
Amortisation of loan arrangement
fees (0.7) (0.7) (1.4)
Fair value loss on derivatives - (0.2) (0.2)
Other finance charges (2.1) (1.1) (2.9)
Finance costs - Adjusted results (5.9) (21.6) (28.0)
--------------------------- --------------------------- -------------------------
Interest payable on Shareholder
debt - (5.3) (5.3)
Break fees and write-off of loan
arrangement fees on debt
refinancing on IPO - (10.7) (10.7)
Finance costs - Adjusting items - (16.0) (16.0)
--------------------------- --------------------------- -------------------------
Finance costs (5.9) (37.6) (44.0)
--------------------------- --------------------------- -------------------------
Net finance costs (5.5) (29.3) (33.8)
--------------------------- --------------------------- -------------------------
6. Tax on profit on ordinary activities
The tax charge for the half year for continuing operations has been calculated by applying the expected full year rate to the half year results with specific adjustments for items that distort the rate (amortisation of acquired intangible assets, share based payments and exceptional items). The tax charge for the period comprises:
Six months to 30 June 2017 Six months to 30 June 2016 Year to 31 December 2017
(GBP million) Unaudited Unaudited Audited
--------------------------- --------------------------- ----------------------------
Current tax
UK corporation tax
Current tax charge on
income for the period 1.9 0.9 1.7
Adjustments in respect of
prior years - - 0.6
Foreign tax
Current tax charge on
income for the period 5.7 2.7 1.6
Adjustments in respect of
prior years - - 0.2
Total current tax charge 7.6 3.6 4.1
--------------------------- --------------------------- ----------------------------
Deferred tax
Current period 3.0 (1.9) (15.2)
Adjustments in respect of
prior years - - (1.5)
Impact of rate changes on
opening deferred tax
balances - - (0.8)
Total deferred tax charge /
(credit) 3.0 (1.9) (17.5)
--------------------------- --------------------------- ----------------------------
Total tax charge / (credit) 10.6 1.7 (13.4)
--------------------------- --------------------------- ----------------------------
The effective tax rate on Adjusted profit before tax for the six months period to 30 June 2017 was 25% (30 June 2016: 21%, 31 December 2016: 17%). A tax credit of GBP6.8 million was recorded in relation to adjusting items in 2017 (2016: credit GBP6.9 million).
7. Discontinued Operation
As part of its growth strategy to focus resources and investment on its largest brands and those with the highest growth potential, in January 2017 the Company announced that it had separated 13 Heritage Brands and classified these in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations". Prior year periods have been restated to reflect this. The results of the discontinued operations which have been included in the consolidated statement of profit and loss are as follows:
Six months to Six months to Year to 31 December
30 June 2017 30 June 2016 2016
Unaudited Unaudited Audited
----------------------------- ------------------------------ -------------------------------
Adjusted Adjusting Adjusted Adjusting Adjusted Adjusting
(GBP million) Results Items Total Results Items Total Results Items Total
--------- ---------- ------ --------- ---------- ------- ---------- ---------- -------
Revenue 18.1 - 18.1 26.3 - 26.3 57.9 - 57.9
Cost of sales (8.2) - (8.2) (11.3) - (11.3) (24.1) - (24.1)
Sales,
marketing
&
administrative
expenses (9.7) (0.2) (9.9) (11.5) (1.4) (12.9) (24.0) (4.5) (28.5)
Operating
profit 0.2 (0.2) - 3.5 (1.4) 2.1 9.8 (4.5) 5.3
--------- ---------- ------ --------- ---------- ------- ---------- ---------- -------
Adjusted
EBITDA 0.2 - 0.2 4.1 - 4.1 11.6 - 11.6
Depreciation
& amortisation - - - (0.6) (1.4) (2.0) (1.8) (2.5) (4.3)
Exceptional
items - 0.1 0.1 - - - - (1.9) (1.9)
Share-based
payments - (0.3) (0.3) - - - - (0.1) (0.1)
--------- ---------- ------ --------- ---------- ------- ---------- ---------- -------
Operating
profit 0.2 (0.2) - 3.5 (1.4) 2.1 9.8 (4.5) 5.3
--------- ---------- ------ --------- ---------- ------- ---------- ---------- -------
Taxation - (3.7) (3.7) (0.6) 0.1 (0.5) (1.8) 0.5 (1.3)
Profit/(loss)
from
discontinued
operation
net of tax 0.2 (3.9) (3.7) 2.9 (1.3) 1.6 8.0 (4.0) 4.0
--------- ---------- ------ --------- ---------- ------- ---------- ---------- -------
Proforma
Earnings
per share
(pence)
- Basic 0.1 (1.0) (0.9) 0.7 (0.3) 0.4 2.0 (1.0) 1.0
- Diluted 0.1 (1.0) (0.9) 0.7 (0.3) 0.4 2.0 (1.0) 1.0
Earnings per
share (pence)
- Basic 0.1 (1.0) (0.9) 0.9 (0.4) 0.5 2.2 (1.1) 1.1
- Diluted 0.1 (1.0) (0.9) 0.9 (0.4) 0.5 2.2 (1.1) 1.1
Exceptional items in discontinued operations include the gain on disposal of HSJ and EMAP publishing Limited of GBP2.7 million (note 11) offset by GBP2.6 million of costs separating the Heritage Brands including IT separation costs and contractor costs. The group incurred a capital tax charge of GBP3.7 million in respect of the capital gain on the sale of the trade and assets. Of this tax charge GBP3.6 million was sheltered by capital losses previously recognised within the group.
The loss from the discontinued operation of GBP3.7 million (30 June 2016: profit GBP1.6 million and 31 December 2016: profit GBP4.0 million) is attributable entirely to the equity holders of the parent company.
Cash flows from discontinued operation
Six months Six months
to 30 to 30 Year to
June June 31 December
(GBP million) 2017 2016 2016
Unaudited Unaudited Audited
----------- ----------- -------------
Net cash generated from operating
activities 1.6 8.2 11.7
Net cash used in investing
activities 37.6 (0.4) (0.9)
----------- ----------- -------------
Net cash inflows for the
year 39.2 7.8 10.8
----------- ----------- -------------
8. Dividends
Amounts recognised and paid as distributions to ordinary shareholders in the year comprise:
Six months to 30 Six months to 30 Year to 31
June 2017 June 2016 December 2016
Unaudited Unaudited Audited
----------------- ----------------- ---------------
Amounts recognised as distributions to equity shareholders
Interim dividend for the year-ended 31 December 2016 - 1.5
pence - - 6.0
Final dividend for the year-ended 31 December 2016 - 3.2 pence 12.8 - -
----------------- ----------------- ---------------
Dividend paid 12.8 - 6.0
----------------- ----------------- ---------------
The directors have approved an interim dividend of 1.8 pence per share (2016: 1.5 pence) totalling GBP7.2 million (2016: GBP6.0 million). This is not included as a liability in the balance sheet as of 30 June 2017.
9. Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.
For the purpose of proforma earnings per share for the six months to 30 June 2016 and year to 31 December 2016, the weighted average number of ordinary shares is stated as if the IPO completed on 12 February 2016 had occurred at the beginning of the 2016 financial year. For the purpose of statutory earnings per share, the weighted average number of ordinary shares is stated as if the group restructure steps completed on 8 February 2016 had occurred at the beginning of 2016.
Both proforma and statutory earnings per share have been calculated with respect to the net profit for the year for the Group, the continuing operations and discontinued operation (note 7).
Six months to 30 June 2017 Six months to 30 June 2016 Year to 31 December 2016
Unaudited Unaudited Audited
------------------------------- -------------------------------- --------------------------------
Adjusted Adjusting Adjusted Adjusting Adjusted Adjusting
Results Items Total Results Items Total Results Items Total
---------- ----------- ------ ----------- ----------- ------ ----------- ----------- ------
Profit
attributable
to equity
shareholders
of the Parent
(GBP million)
Profit for the
year -
continuing
operations 53.6 (21.5) 32.1 34.4 (27.9) 6.5 54.2 (42.6) 11.6
Profit for the
year -
discontinued
operations 0.2 (3.9) (3.7) 2.9 (1.3) 1.6 8.0 (4.0) 4.0
53.8 (25.4) 28.4 37.3 (29.2) 8.1 62.2 (46.6) 15.6
---------- ----------- ------ ----------- ----------- ------ ----------- ----------- ------
Proforma
earnings per
share (pence)
Basic earnings
per share 13.5 (6.4) 7.1 9.3 (7.3) 2.0 15.6 (11.7) 3.9
Diluted
earnings per
share 13.4 (6.3) 7.1 9.3 (7.3) 2.0 15.5 (11.6) 3.9
Continuing
operations
Basic earnings
per share 13.4 (5.4) 8.0 8.6 (7.0) 1.6 13.6 (10.7) 2.9
Diluted
earnings per
share 13.3 (5.3) 8.0 8.6 (7.0) 1.6 13.5 (10.6) 2.9
Discontinued
operation
Basic earnings
per share 0.1 (1.0) (0.9) 0.7 (0.3) 0.4 2.0 (1.0) 1.0
Diluted
earnings per
share 0.1 (1.0) (0.9) 0.7 (0.3) 0.4 2.0 (1.0) 1.0
Earnings per
share (pence)
Basic earnings
per share 13.5 (6.4) 7.1 11.5 (9.0) 2.5 17.1 (12.8) 4.3
Diluted
earnings per
share 13.4 (6.3) 7.1 11.5 (9.0) 2.5 17.1 (12.8) 4.3
Continuing
operations
Basic earnings
per share 13.4 (5.4) 8.0 10.6 (8.6) 2.0 14.9 (11.7) 3.2
Diluted
earnings per
share 13.3 (5.3) 8.0 10.6 (8.6) 2.0 14.9 (11.7) 3.2
Discontinued
operation
Basic earnings
per share 0.1 (1.0) (0.9) 0.9 (0.4) 0.5 2.2 (1.1) 1.1
Diluted
earnings per
share 0.1 (1.0) (0.9) 0.9 (0.4) 0.5 2.2 (1.1) 1.1
The weighted average number of ordinary shares in issue during the period, excluding those held by Employee Benefit Trusts was 400.0 million (30 June 2016: 325.4 million and 31 December 2016: 362.9 million). The Proforma weighted average number of ordinary shares in issue during the period is 400.0 million (30 June 2016 and 31 December 2016: 400.0 million respectively).
The calculations of basic and diluted earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of shares outstanding during the related period. The impact of all potentially dilutive share options would be to increase the weighted average number of shares used in the calculation of earnings per share to 402.4 million (30 June 2016: 325.7 million; 31 December 2016: 363.5 million) and to increase the weighted average number of shares used in the calculation of proforma earnings per share to 402.4 million (30 June 2016: 400.3 million; 31 December 2016: 400.6 million).
10. Business combinations
2017- acquisition of MediaLink
On 28 February 2017, the Group acquired 100% of the shares in MediaLink LLC ("MediaLink"), an unlisted company based in the United States whose primary activity is the provision of advisory and business services to media platforms and brands. The company forms part of the Information Services segment.
The purchase price is expected to total GBP70.5 million, which comprises:
-- GBP55.3 million (net of consideration for cash acquired) paid in 2017;
-- consideration contingent on the results of the 2017, 2018, and 2019 financial years payable in 2018 to 2020 and estimated to total GBP16.9 million which has been discounted to present value of GBP14.2 million using a discount rate relevant to the acquired business.
In addition to the contingent consideration described above, and subject to continued employment, the vendors also receive employment income contingent on the results of the 2017, 2018 and 2019 financial years payable in 2018 to 2020, estimated to total GBP16.9 million. To determine the contingent consideration, the Directors are required to make a judgement regarding the current and future results.
This acquisition-related contingent employment cost is being accrued over a contractually defined period and GBP3.7 million was recorded as an exceptional cost in the six months ended 30 June 2017. There is a maximum limit of $206.6 million on the total consideration payable including acquisition-related employment costs; there is no minimum limit.
a) Identifiable assets acquired and liabilities assumed
The provisional fair values of the identifiable assets purchased and liabilities assumed of MediaLink as at the date of acquisition were as follows:
Fair
(GBP million) value
-------
Brands 14.8
Customer relationships and
databases 14.5
Property, plant and equipment 1.1
Other non-current assets 0.3
Trade receivables 5.7
Prepayments and accrued income 1.6
Other receivables 0.3
Cash 1.0
Trade and other payables (3.3)
Deferred income (0.5)
Total identifiable net assets
at fair value 35.5
-------
Initial cash consideration
relating to business combination 55.3
Deferred and contingent consideration
payable in 2018 4.6
Deferred and contingent consideration
payable in 2018-2020 9.6
Consideration for cash acquired 1.0
Total consideration 70.5
Goodwill on acquisition 35.0
-------
The goodwill of GBP35.0 million arising on acquisition is attributable to existing workforce skills and expertise, with expertise that can be applied to other parts of the group, as well as the deepening of the Company's exposure to the branded communications end market.
b) Acquisition-related costs
In the six months ended 30 June 2017, the Group incurred acquisition-related costs of GBP0.8 million related to external legal fees and due diligence costs. These costs have been included within exceptional items in the consolidated statement of profit and loss.
(c) Results contribution in the six months ended 30 June 2017
From the date of acquisition, MediaLink contributed GBP16.9 million revenue and a profit before tax of GBP4.5 million to the Group in the six months ended 30 June 2017. If the acquisition had taken place at the beginning of 2017, revenue would have been GBP24.6 million and the profit before tax for the Group would have been GBP5.7 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of the acquisition would have been the same if the acquisition occurred on 1 January 2017.
2016 - acquisition of One Click Retail
On 31 August 2016, the Group acquired 100% of the shares in Oneclickretail.com LLC ("OCR"), an unlisted company based in the United States whose primary activity is the provision of e-commerce data analytics. The company forms part of the Information Services segment.
The purchase price is expected to total GBP62.0 million, which comprises:
-- GBP33.7 million (net of cash acquired) paid in 2016; -- GBP0.3 million working capital adjustment received in 2017;
-- consideration contingent on the results of the 2016, 2017, 2018 and 2019 financial years payable in 2017 to 2020 and estimated to total GBP34.2 million which has been discounted to present value of GBP28.2 million using a discount rate relevant to the acquired business
In addition to the contingent consideration described above, and subject to continued employment, certain vendors also receive employment income contingent on the results of the 2017 and 2018 financial years payable in 2018 to 2019, estimated to total GBP32.1 million. To determine the contingent consideration, the Directors are required to make a judgement regarding the current and future results.
This acquisition-related contingent employment cost is being accrued over a contractually defined period and GBP5.3 million was recorded as an exceptional cost in the year ended 31 December 2016.
There is a maximum limit of $225.0 million on the total consideration payable including acquisition-related employment costs; there is no minimum limit.
The fair values were:
Fair
(GBP million) value
-------
Customer relationships and databases 28.4
Brands 7.0
Trade and other receivables 1.6
Accrued income 0.6
Cash 0.4
Trade and other payables (0.1)
Deferred income (2.5)
Total identifiable net assets at fair
value 35.4
-------
Initial cash consideration relating to
business combination 33.4
Deferred and contingent consideration
payable in 2017 3.9
Deferred and contingent consideration
payable in 2018-2020 24.3
Consideration for cash acquired 0.4
Total consideration 62.0
-------
Goodwill on acquisition 26.6
-------
Reconciliation of cash outflows relating to business combinations
Six months
to 30
June
(GBP million) 2017
-----------
Analysis of cash outflow in the Consolidated
Statement of Cash Flows
Total consideration in respect of the
2017 acquisition 70.5
Cash acquired in the 2017 acquisition (1.0)
Deferred and contingent consideration
on the 2017 acquisition to be paid in
future years (14.2)
-----------
Cash paid in 2017 in respect of the 2017
acquisition 55.3
-----------
Acquisitions prior to 2017
Cash payments of deferred and contingent
consideration in relation to prior years'
acquisitions 15.5
-----------
Net cash outflows relating to acquisition
of businesses, net of cash acquired 70.8
-----------
Contingent consideration is the Group's only financial instrument classified as level 3 in the fair value hierarchy. The key assumptions taken into consideration when measuring this acquisition related liability are the performance expectations of the acquisition and a discount rate that reflects the size and nature of the new business.
During the period ended 30 June 2017, current and previous acquisitions led to a further GBP14.2 million of contingent consideration being recognised, capital payments of GBP15.5 million were made and GBP2.1 million was charged to the profit and loss account in respect of the discount unwind. The total liability recognised at 30 June 2017 is GBP51.4 million (31 December 2016: GBP51.0 million).
11. Disposals
In the period ended 30 June 2017 the Group disposed of the following businesses:
Date of Share/Asset
Country disposal deal
-------- ---------- ------------
January
Health Service Journal UK 2017 Asset deal
EMAP Publishing Limited UK May 2017 Share deal
The Group recognised a total gain on disposal of the above businesses of GBP2.7 million as an exceptional item within discontinued operations (note 7):
Six months
to 30
June
(GBP million) 2017
-----------
Consideration 42.5
Working capital adjustment (4.7)
-----------
Consideration received 37.8
-----------
Net assets disposed of (31.9)
Disposal costs (3.2)
-----------
Gain on disposal 2.7
-----------
Details of assets and liabilities disposed
of are provided in the following table:
Six months
to 30
June
(GBP million) 2017
-----------
Goodwill (15.1)
Brands, Customer Relationships and Databases (25.1)
Tangible fixed assets including Software (2.0)
Trade and other receivables (6.9)
Trade and other payables 4.2
Deferred income 9.0
Deferred tax liability on disposed intangibles 4.0
-----------
Net assets and liabilities disposed (31.9)
-----------
The net inflow of cash in respect of the disposal of businesses is GBP37.8 million.
12. Reconciliation of movement in net debt
Short-term Interest rate Cross currency External External net
(GBP million) Cash deposits cap swaps Borrowings debt
-------- ---------------- ---------------- ---------------- ---------------- -----------------
At 1 January
2016 Audited 35.2 9.2 1.0 (2.1) (425.6) (382.3)
Exchange
differences 5.3 1.6 - - (34.4) (27.5)
External debt
repayment (454.6) - - - 454.6 -
External debt
drawdown 265.2 - - - (265.2) -
Fair value
movements - - (0.2) 2.7 - 2.5
Non-cash
movements - - (0.4) - (11.0) (11.4)
Net cash
movement 211.6 8.2 - (0.6) 5.6 224.8
-------- ---------------- ---------------- ---------------- ---------------- -----------------
At 30 June 2016
Unaudited 62.7 19.0 0.4 - (276.0) (193.9)
-------- ---------------- ---------------- ---------------- ---------------- -----------------
Exchange
differences 2.8 - - - (9.4) (6.6)
Non-cash
movements - - - - (0.6) (0.6)
Net cash
movement (22.0) (0.6) - - - (22.6)
-------- ---------------- ---------------- ---------------- ---------------- -----------------
At 31 December
2016 Audited 43.5 18.4 0.4 - (286.0) (223.7)
-------- ---------------- ---------------- ---------------- ---------------- -----------------
Exchange
differences (0.2) (0.2) - - 1.1 0.7
External debt
repayment - - - - 25.6 25.6
External debt
drawdown - - - - (26.5) (26.5)
Non-cash
movements - - (0.1) - (0.5) (0.6)
Net cash
movement 12.4 0.7 - - - 13.1
-------- ---------------- ---------------- ---------------- ---------------- -----------------
At 30 June 2017
Unaudited 55.7 18.9 0.3 - (286.3) (211.4)
-------- ---------------- ---------------- ---------------- ---------------- -----------------
Included within cash is GBP0.5 million (2016: GBPnil) of which the use is restricted to meeting collateral obligations.
The Group's borrowings at 30 June 2017, 30 June 2016 and 31 December 2016 were GBP66.0 million, $96.0 million and EUR171.0 million and are shown net of unamortised issue costs. The carrying amounts of borrowings approximate their fair value.
The Group had interest rate caps at 30 June 2017 of GBP0.3 million all included in current asset (30 June 2016 and 31 December 2016: GBP0.4 million of which GBP0.1 million was included within non-current assets). The interest rate caps are used to cap an element of the Group's external borrowings, which all bear interest at floating rate. As at 30 June 2017, the total notional amount of outstanding interest rate caps to which the Group is committed is GBP125.0 million (30 June 2016: GBP190.8 million and 31 December 2016 GBP182.9 million).
13. Deferred tax
The major deferred tax assets and liabilities recognised by the Group, and the movements in the period, are set out below:
Depreciation vs. tax Other temporary
(GBP million) Tax losses allowances differences Intangible assets Total
----------- ------------------------ ------------------------ ------------------ ------
At 1 January 2016
Audited 24.6 11.6 4.0 (40.7) (0.5)
Credit to the
consolidated profit and
loss statement for the
period (0.9) (0.4) 0.6 2.7 2.0
Foreign exchange
movements 1.8 - 0.5 (1.3) 1.0
----------- ------------------------ ------------------------ ------------------ ------
At 30 June 2016
Unaudited 25.5 11.2 5.1 (39.3) 2.5
----------- ------------------------ ------------------------ ------------------ ------
Credit to the
consolidated profit and
loss statement for the
period 4.1 (0.5) 7.2 2.7 13.5
Adjustments in respect
of prior years 1.8 - - (0.3) 1.5
Impact of rate changes - (0.5) - 1.6 1.1
Foreign exchange
movements 0.8 0.1 0.5 0.6 2.0
Reclassification to
assets and liabilities
held for sale - (0.4) - 4.4 4.0
----------- ------------------------ ------------------------ ------------------ ------
At 31 December 2016
Audited 32.2 9.9 12.8 (30.3) 24.6
----------- ------------------------ ------------------------ ------------------ ------
Charge to the
consolidated profit and
loss statement for the
period (5.4) (0.6) 1.5 1.5 (3.0)
Credit to equity - - 0.1 - 0.1
Foreign exchange
movements (0.9) - (0.7) - (1.6)
At 30 June 2017
Unaudited 25.9 9.3 13.7 (28.8) 20.1
----------- ------------------------ ------------------------ ------------------ ------
14. Related parties
There are no material related party transactions requiring disclosure under IAS 24 "Related Party Disclosures" other than compensation of key management personnel, which will be disclosed in the Group's Annual Report for the year ending 31 December 2017.
15. Events after the reporting period
There were no reportable events after 30 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAEXFAFKXEAF
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July 24, 2017 02:00 ET (06:00 GMT)
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